Dave Ramsey – Total Money Makeover

dave ramsey

This is my¬† book review of Dave Ramsey’s Total Money Makeover.

If you are in a lot of debt, don’t know where your money is going or just want to manage money better I think this book is a great start. This is my #1 recommended book for beginner’s.

Awhile back my sister and dad really got into Dave Ramsey and started to pay off their debt, then slowly they fell off the boat. The book collected dust for both of them. I started reading about money and my sister suggested I read Dave Ramsey’s book. Like me with a fresh 6 pack of butter tarts…….. I ate it up!

The book was a super easy read and full of real stories of people who did the system and are living it up now debt free. I think I read the book in 2 days and its no small book. It was time to start. I suggested to the wife to read it as well cause we are going to do this! She read it in about a week and was on board as well.

I owe a lot credit of my financial position to this man. We were 70k in debt when I read this book, with his system we paid that off in roughly 2 years. As Dave says We were sick and tired of being sick and tired…… I drank the juice, pushed the chips and went all in.

The Book

The start of the book is about his life, he went big when he was in his early 20’s and was really wealthy but it was built on debt. The bank eventually called him out on all his loans and he went bankrupt. He slowly increased his wealth again through hard work and old school common sense.

Dave breaks down his system in 7 baby steps and urges everyone to go in order.

dave ramsey

Baby Step 1

Put $1,000 in a emergency fund. This is the first step. Sell whatever you can, do whatever but get that thousand bucks! He wants you to have money so if anything comes up, you don’t need to go into debt for it.

Baby Step 2

Pay off debt using the debt snowball. He recommends writing down all your debts (excluding your mortgage) smallest to largest in one column. The next column put the minimum payment beside each. Next column total payment – For first item it will be same as minimum payment but the one under add the top minimum payment to the second minimum payment. Do this for your whole list to see what you are currently paying monthly in just minimum payments… It was a eye opener for us, we were paying approx $1700 per month in student loans, credit cards, car payments. Ignore interest rates we just want you to pay the lowest ones first and start this snowball. Make minimum payments on everything but the top item throw all extra money at it until its gone. Now on to the next one!

Baby Step 3

Woot! Congratulations you did it. Go spend a little money and celebrate. OK now save 3-6 months of expenses in savings. Mortgage payments, bills, food, life etc. I wasn’t a huge fan of this one cause I would rather invest it but he states that women love seeing a safe haven account. I can tell ya from personal experience the wife loves having money in a account for safety if for some reason we fall short or a car repair pops up.

Baby 4

Invest 15% in a tax favored account. He recommends saving 15% before taxes, of your paycheque. Just put it away before you see it. If you can save more bonus! He believes in mutual funds but this is where I disagree. There are great index funds or etfs if you want diversity with lower fees than mutual funds. Or you can buy high quality dividend companies. Either way do your research but start investing!

Baby 5

Fund College for your kids. Now that you are debt free and are saving for your own future, time to save for your kids schooling. College will only get more expensive and the government will help ya out saving for it. In Canada we can throw $2500 per year per kid to a resp and the govt will throw us $500 per kid per year! sweet! Read More about that here on my page about RESP’s.

Baby Step 6

Pay off your home early. They say a paid for house, the grass is greener. I wouldn’t know =) Throw all extra money towards your mortgage and pay that house off early. I personally like the growth and dividends from my investments over this since current mortgage yields are so low. But when both our tfsa’s and rrsp’s are maxed, I will be focused on paying off the mortgage.

Baby Step 7

Build Wealth and Give A Lot. It truly is better to give than receive. You and now rich, enjoy it. Donate to whatever charities you like and help lots of people. Nice work, you did it. Financial Freedom.

Conclusion

I highly Recommend this book to beginner’s. It changed our life. You can also get his podcasts for free just search dave ramsey in the podcast search. It will help get you motivated hearing other peoples stories. If you are interested in the book and would like to support me, feel free to click the amazon link below. Cheers and Good Luck!

The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness

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4 Responses

  1. Great review PCI. I’m a huge fan of Dave Ramsey. I listen to his podcasts regularly. I read the Total Money Make Over. And, I even attend a couple of his Financial Peace University classes. However, I must say that I don’t follow him religiously either. As for baby step one, I completely agree. Right now, my starter emergency fund is about $400, and I might have to use it for something. So, I constantly have to rebuilt that starter emergency fund to $1000.

    I love his approach to tackling debt, that is the smallest to the largest via the debt snowball method. Where I diverge though is that I still invest while paying down debt, which is not his approach. His approach is to focus everything on getting out of debt. I don’t disagree that his approach works and I recognize that it has probably helped millions of people get out of debt. But, for my personal situation, I’m really focused on investing in my retirement accounts and dividend portfolio. I have one student loan remaining and I recognize that it’s going to take me longer than necessary to get out of that debt, but I understand the cons and accept them.

    For baby step three, I have no quarrels there. Although I agree that if you can save more than 15%, then even better. Finally, I’m torn between paying off your mortgage early which Dave Ramsey recommends, vs not paying off your mortgage early, which Ric Edelman recommends in his book, the Truth About Money. Perhaps you could review that one next.

    All in all, I like Dave Ramsey. Thanks for the review of his book. I just choose what parts of his plan I want to follow based on the specifics of my life. As they say, personal finance is, after htt, personal.
    Dividend Portfolio recently posted…A Moment To ReflectMy Profile

  2. Leo T. Ly says:

    I am currently on baby step #6. Although I am also working on step 4 and 5 continuously.

    I would love to have a paid off house. However, I don’t have honk that it’s necessary. Look at it this way, if you have the financial discipline to pay off your mortgage, you will definitely have the discipline to save and grow your money.

    The important thing to keep in mind is: save and invest often.
    Leo T. Ly recently posted…The Easiest Way To Boost Your Retirement Savings By $100,000My Profile

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